Tax and Legal update 3/2024

Thai Revenue Department conducts public hearings on the draft legislation regarding Pillar Two

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On 7 March 2024, the Cabinet agreed and approved the principle of OECD Pillar Two, also known as Global Minimum Tax, and tasked the Thai Revenue Department (“TRD”) with formulating the corresponding legislation.

What is the OECD Pillar Two in our previous article here:

The TRD recently released the initial draft of this legislation for public consultation. We have delved into the specifics of this draft legislation below.

Detailed discussion

    a. General overview

The draft legislation aims to address the tax challenges arising from the digitalisation of the economy and provide the specific outlines to govern a minimum tax rate for Multinational Enterprises (MNEs) in order to collect top-up tax in accordance with the Global Anti-Base Erosion Rules (GloBE). The top-up tax under this draft is classified as assessed tax and shall not be deemed income tax. TRD shall be the responsible authority for collecting such top-up tax.

    b. Taxpayer

This draft creates a taxation obligation for MNEs in Thailand whose ultimate parent company has consolidated revenues exceeding € 750 million. MNEs that are government agencies, international organizations, non-profit organizations, etc., shall not be governed by this draft.

     c. Tax base and tax rate

The top-up tax arises from low-tax constituent jurisdictions, where the minimum tax rate is 15%.

Jurisdictional Effective Tax Rate (ETR)

First, the ETR of the constituent entities in each jurisdiction shall be calculated to compare with the minimum rate of 15%. The formula for ETR is shown below.


ETR  = Adjusted Covered Taxes  ÷ Net GloBE income

Adjusted Covered Taxes

This refers to the adjusted "Covered Taxes" recorded in the financial statements of each constituent entity within the group. You calculate it from the income or profits of that entity according to the GloBE criteria specified in the ministerial regulations.

Top-up tax rate

Where the effective tax rate of the constituent entities in the MNEs group in the jurisdiction might be lower than the minimum rate (15%), the difference between the minimum rate and jurisdictional effective tax rate (ETR) is the jurisdictional Top-up tax percentage.


Minimum rate (15%) – ETR  = Top-up tax %

Top-up tax

To determine the group's top-up tax liability, multiply the jurisdictional top-up tax percentage by the jurisdictional Excess Profit.

Jurisdictional Excess Profit

Jurisdictional Excess Profit is the GloBE income after deducting the Substance-Based Income Exclusion, which is the sum of 5% of the payroll cost and 5% of the net book value of tangible assets of all low-tax constituent entities.


Jurisdictional Excess Profit = GloBE income - Substance Based Income Exclusion

Substance-Base Income Exclusion

Substance-Base Income Exclusion is 5 percent of the total payroll cost of the MNEs located in that country and 5 percent of the net book value of tangible assets owned by the group of MNEs in that country.

Substance Based Income Exclusion = 5% of payroll cost + 5% of the net book value of tangible assets

The jurisdictional top-up tax

The jurisdictional top-up tax of each country and each group of MNEs located in that country is calculated as follows:


Top-up tax = (Jurisdictional Excess Profit x Top-up tax %) - Quantified Domestic top-up tax

    d. Top-Up Tax Allocation Rules

There are three rules under this Draft to determine the top-up tax allocation, the summary of which is as follows:


The Domestic Top-Up Tax

If Thailand is the low-tax jurisdiction for an MNE group, each entity within the group located in Thailand must pay a top-up tax, equivalent to the top-up tax incurred in Thailand according to the calculation method set above and allocate the top-up tax proportionally to each constituent entity.

Income Inclusion Rules (IIR)

If the constituent entity in Thailand is an ultimate parent company, intermediate parent company, or partially owned parent entity that qualified for IIR, the top-up tax paid in Thailand shall be calculated from the ownership interest percentage in low-tax constituent entities and the top-up tax to be borne by the low-tax constituent entities in the group.

Undertaxed Payment Rules (UTPR)

If the low-tax jurisdiction is a foreign country for a multinational corporate group, each entity within the group located in Thailand must pay a top-up tax for the fiscal year. It is based on the top-up tax that Thailand receives from the total top-up tax incurred in foreign jurisdictions. Subtracting the top-up tax that any corporate entity within the group is subject to under-qualified income inclusion rules in a foreign country.

      e. Other matters

  • The specific rules for
    • Corporate restructurings
    • Joint venture, multi-parented MNE group, flow-through entity, stateless entity, investment entity, the deductible dividend regimes entity and eligible distribution tax systems entity
  • The election provision may be used to decide whether to comply or not with this draft for the specific MNEs, as the case may be.
  • The taxpayers can determine which entity will file the relevant top-up tax return.
  • The taxpayers must file the notification, GloBE Information Return, top-up tax return, and pay the top-up tax to TRD via electronic system within 15 months from the end date of the fiscal year.
  • Notification
    • The entity responsible for submitting the Notification under this draft shall be all entities of MNEs situated in Thailand or authorized by its affiliates to submit the Notification on their behalf.The Notification must prescribe:
      • 1)  information of group MNEs of the taxpayer.
      • 2)  information of the entity in 1) that responsible to submit the notification.
      • 3)  country where the entity operates.
  • GloBE Information Return
  • All entities of MNEs situated in Thailand or the entity authorized by its affiliates to submit the GloBE Information Return on their behalf shall be responsible for submitting the GloBE Information Return under this draft.If the ultimate parent company or the authorized entity submits the GloBE Information Return in the country where the ultimate parent company or the authorized entity establishes and such country is bonded by Qualifying Competent Authority Agreement with the Thai authority on the fiscal year, the entity in Thailand shall be exempted from GloBE Information Return submission.
  • Under this draft, the assessment official shall have the power to assess and charge the top-up tax for up to 10 years from the last day of GloBE Information Return submission.
  • You can appeal against an assessment under this draft if you file it within 30 days of receiving the assessment.


Grant Thornton’s views

Most of the complexity has not been introduced under this draft, e.g., the GloBE Income calculation method and its exchange rate, transitional provisions regarding the substance-based income exclusion or the safe harbours.

What Grant Thornton can help:

Our tax experts can walk you through the essential and significant provisions of the draft legislation which may affect your business and the submission of the remarks you may have during the public hearings.